What the company does 🧠
Synopsys is a software company that helps engineers design, test, and verify advanced computer chips before they are manufactured. Its tools are widely used across the semiconductor ecosystem, including chip designers, integrated device manufacturers, and foundries.
“Synopsys doesn’t make chips — it makes the software that helps make sure chips work before they’re built.”
- EDA software (Electronic Design Automation): software used to design and verify complex chips.
- Semiconductor IP: pre-built chip “building blocks” that customers license to save time.
- Software integrity & security: tools to find bugs and vulnerabilities in software code.
Financial Highlights 📊
In FY2025, Synopsys reported $7.1B in revenue (up from $6.1B in FY2024). However, operating income declined to $0.9B (from $1.4B in FY2024), reflecting higher operating costs.
- Revenue: $7.1B (FY2025) vs. $6.1B (FY2024)
- Operating income: $0.9B (FY2025) vs. $1.4B (FY2024)
- Diluted EPS: $8.0 (FY2025) vs. $14.5 (FY2024)
FY2025 also shows a major balance-sheet expansion tied to acquisition activity, including a large increase in intangible assets and goodwill and a sharp rise in long-term debt.
Key Risks ⚠️
Synopsys highlights company- and industry-specific risks that can affect results and execution:
- Semiconductor cycle sensitivity: customer spending can slow during industry downturns.
- Deal timing and revenue “lumpiness”: large contracts can shift results between periods.
- Competition and technology pace: the company must keep innovating to maintain leadership.
- Acquisition and integration risk: combining large businesses can be complex and disruptive.
- High leverage and interest burden: increased debt raises fixed costs and reduces flexibility.
- Cybersecurity and IP/legal risks: security incidents or IP disputes can be costly and disruptive.
- Export controls and geopolitics: cross-border rules can limit where and how software is sold or supported.
MD&A (what management emphasized) 🧭
Management frames FY2025 as a year of continued demand for advanced design and verification tools, driven by rising chip complexity (more steps, simulation, and testing needed to build modern chips). They also stress that investment in R&D is essential to stay competitive, even if it pressures operating margins in the near term.
- Revenue mix matters: some revenue is recognized over time (subscriptions), while some depends on contract timing.
- Spending is intentional: management prioritizes long-term technology leadership.
- Cash generation: operating cash flow remained positive, while major transactions drove large investing and financing flows.
Takeaway 🎯
Synopsys remains a mission-critical software provider in the semiconductor workflow, benefiting from the industry’s growing complexity. FY2025 showed strong revenue growth, but weaker operating profitability alongside a much larger balance sheet and higher debt following major acquisition activity. For beginners, the core story is: durable demand and strategic importance, paired with higher financial and integration complexity that management must execute through.
Income Statement Summary
(Unit: $m, EPS in $)
| FY 2023 | FY 2024 | FY 2025 | |
|---|---|---|---|
| Revenue | 5318.0 | 6127.4 | 7054.2 |
| Cost of Goods Sold | 1030.8 | 1245.3 | 1623.5 |
| Gross Profit | 4287.2 | 4882.1 | 5430.6 |
| SG&A | 1101.6 | 1427.8 | 1843.8 |
| Operating Income | 1273.2 | 1355.7 | 914.9 |
| Non-Operating Income/Expense | 34.9 | 195.0 | 924.9 |
| Interest Income/Expense | -2.7 | -36.8 | -446.7 |
| Income Before Tax | 1305.5 | 1513.9 | 1393.1 |
| Income Tax | 90.2 | 99.7 | 56.0 |
| Net Income | 1229.9 | 2263.4 | 1332.2 |
| EPS | 7.9 | 14.5 | 8.0 |
Plain English
Revenue grew each year through FY2025, but operating income fell in FY2025, which lowered profitability. The FY2025 income statement also shows a much larger interest expense, which can happen when a company takes on significant debt (often linked to acquisitions). EPS dropped in FY2025 as a result.
Key Financial Ratios
| Ratio | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| ROE (%) | 20.0 | 25.2 | 4.7 |
| ROA (%) | 11.9 | 17.3 | 2.8 |
| ROTC (%) | 20.6 | 15.0 | 2.2 |
| ROIC (%) | 25.0 | 24.8 | 2.3 |
| Gross Margin (%) | 80.6 | 79.7 | 77.0 |
| Operating Margin (%) | 23.9 | 22.1 | 13.0 |
| Pretax Margin (%) | 24.5 | 24.7 | 19.7 |
| Net Margin (%) | 23.1 | 36.9 | 18.9 |
| Debt-to-Equity Ratio (D/E) (%) | 0.3 | 0.2 | 47.6 |
| Net Debt / EBITDA (x) | -0.9 | -2.4 | 6.7 |
| Interest Coverage Ratio (x) | 471.0 | 36.8 | 2.0 |
| Current Ratio (%) | 114.9 | 244.1 | 161.5 |
| Quick Ratio (%) | 85.0 | 188.1 | 120.0 |
| Fixed Asset to Long-term Capital Ratio (%) | 9.0 | 6.3 | 1.7 |
Plain English
In FY2023–FY2024, Synopsys showed very high margins and strong returns (ROE/ROIC). In FY2025, returns dropped sharply because the company’s capital base expanded (more debt and much larger total assets) while operating income fell. Two leverage signals stand out in FY2025: Net Debt / EBITDA jumped to 6.7x and Interest Coverage fell to 2.0x, meaning operating profits covered interest expense only about two times. Liquidity (current/quick ratios) still looks healthy, but leverage increased meaningfully.
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
👉 Synopsys (SNPS) 2025 10-K Analysis (Filed 2025) | Explained for Beginners